When analyzing the markets, the regular "trace" is the S&P 500 price.
The white trace is the 10 year Treasury yield as a comparative (TNX).
You need to pay attention to this.
"This time it's different" is often said. It is almost always wrong, and believing in it will almost always make you broke.
Here's reality folks.
Over the previous 10 years the TNX has never declined meaningfully without the S&P 500 following it, and declining to near or below it on a comparative basis.
The TNX almost always leads on declines too, sometimes by as much as six months.
Well, it's been six months.
In 2007, the TNX peaked in late June, after which it began a dive.
The market peaked in the middle of October of that year at 1576.
The decline essentially reached the comparative bottom.
Now the TNX has peaked the first week of April of this year, and is quite close to the March 2009 lows.
Yet the S&P, after it took a swoon, has recovered.
Exactly as it did in 2007.
We all know what came next.
This is not a sign of "improvement" nor is it a sign to "buy stocks", as Cramer claimed today after the FOMC announcement.
To the contrary.
It is a strong signal to sell everything and get the hell away from the stock market.
It is an indication that the market should, if it follows past precedent, decline by as much as 30%, and perhaps more.
The market usually leads the TNX when it bottoms and the market heads higher.
The TNX always leads the market when it declines.
The 2yr is at all time record low yields.
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